Pablo Azcárraga
President
National Tourism Business Council (CNET)
/
View from the Top

Potentializing the Growth of the Sector

Sat, 12/01/2018 - 14:43

Q: What role does the tourism sector play in Mexico’s economic development?

A: Mexican tourism is cyclical. The 2008 financial crisis greatly impacted the sector but since then it has enjoyed five consecutive years of double-digit growth. Tourism revenue totaled much more than that of oil and gas exports. Tourism was the only sector to register a surplus in 2016, which amounted to US$9.3 billion.

Q: Why has investment in tourism increased so drastically in the last five years?

A: In 2016, Mexico received more than 35 million international visitors but it also hosted more than 80 million domestic tourists. Tourism will continue to grow in the years to come, generating more than US$19.5 billion in foreign revenues. The industry has invested over US$86 billon in the last five years. It is the industry that invests the most in Mexico.

We are constantly opening new hotels. Each of the hotels we construct requires an investment of at least US$50 million. There is a curious disconnect between tourism and other industries in that a US$20 million investment in a project in any other industry is newsworthy, whereas in tourism that amount does not represent even one development. Mexico has great tourism potential for both leisure and business and we are beginning to think twice about how we are approaching it.

Q: What does Mexico need to do to reach its tourism potential?

A: The sector needs to diversify, opening new markets other than the US and Canada and moving away from its dependency on its beaches. North American countries will continue to be the most important contributors to Mexico’s tourism development in the future but we should complement this with higher market penetration from other countries. If we do not invest, our numbers will remain stagnant at 35 million tourists for years to come. The lack of a large airport in Mexico has been an enormous bottleneck for the industry.

Q: How could the regulatory framework and fiscal incentives be improved to attract more investment?

A: There must be a change in the Fiscal Reform. We live in a vicious cycle where if a tourism destination is successful, the municipality and state are allocated fewer resources to support the sector. The state and municipal governments suffer because the money collected in taxes is absorbed by the federal government and it leaves only a small proportion for the development of the area.

This will only lead to problems since four to five days of the week destinations are at full capacity. We need to develop a new fiscal incentive for tourist investment deduction. The Dominican Republic has grown dramatically in the last few years thanks to a governmental program that encouraged and supported investment in tourism. It developed a program where the companies that invested received tax deductibility for 10-20 years. Much of the investment that was coming into Mexico moved to the Dominican Republic for these reasons.

Q: What is the main factor that is holding back the Mexican tourism sector?

A: Mexico is a difficult country to develop because it continues to be extremely bureaucratic and has too many formalities. Often, the requisites of the federal government are not aligned with those at state and municipal levels, which results in a delay in investment due to a lack of continuity. But the future looks bright. Our steady growth will continue to motivate players to change the sector’s business model and incorporate more efficient schemes that will allow us to boost growth. The potential market is huge, with more than 200 million Americans traveling within the US while only around 20 million come to Mexico. The country can only grow from here but right now it is in a transition period where tourism has been improving yet it is not given the recognition it deserves. We are moving to maturity and will continue to professionalize processes with the goal of taking full advantage of the market.